*

The Honorable Adrian G. Duplantier, United States District Judge

for the Eastern District of Louisiana, sitting by designation.

1

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

ELECTRONIC CITATION: 2003 FED App. 0286P (6th Cir.)

File Name: 03a0286p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

_________________

In re: EDWIN M. MAUGHAN,

SR.,

Debtor.

 

JOHN P. NARDEI,

Plaintiff-Appellant,

v.

EDWIN M. MAUGHAN, SR.,

Defendant-Appellee.

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No. 01-4151

Appeal from the Bankruptcy Appellate

 Panel of the Sixth Circuit.

No. 98-41905—William T. Bodoh, Bankruptcy Judge.

Submitted: March 28, 2003

Decided and Filed: August 14, 2003 

Before: MERRITT and BATCHELDER, Circuit Judges;

DUPLANTIER, District Judge.*

2 In re Maughan No. 01-4151

_________________

COUNSEL

ON BRIEF: Mark D. Shepard, BABST, CALLAND,

CLEMENTS & ZOMNIR, Pittsburgh, Pennsylvania, for

Appellant. Andrew W. Suhar, Youngstown, Ohio, for

Appellee.

_________________

OPINION

_________________

ALICE M. BATCHELDER, Circuit Judge. Plaintiffappellant John Nardei appeals an order from the Bankruptcy

Appellate Panel (“BAP”) of the Sixth Circuit reversing and

remanding a judgment of the United States Bankruptcy Court

for the Northern District of Ohio. Nardei, a partially secured

creditor of defendant-appellee Edwin Maughan, argues that

the BAP erred in reversing the bankruptcy court’s order

granting Nardei an extension to file a complaint objecting to

discharge. Although Nardei acknowledges that he failed to

file timely either his complaint or his request for an extension

of time for filing that complaint, he argues that the

bankruptcy court correctly held that Bankruptcy Rules

4004(a) and 4007(c)—the rules governing the filing of

complaints objecting to discharge under 11 U.S.C. §§ 523 and

727—are not jurisdictional in nature, but instead establish

only filing deadlines that are subject to equitable tolling. The

BAP’s opinion finding that those rules are jurisdictional and

reversing the bankruptcy court, Nardei argues, must be

reversed. Because we find that the precedent of this circuit

compels us to conclude that these rules are not jurisdictional,

we will reverse the order of the BAP and affirm the decision

of the bankruptcy court.
No. 01-4151 In re Maughan 3

I. BACKGROUND

The relationship between these parties began when John

Nardei, a resident of Youngstown, Ohio, purchased U.S. Gold

Eagle coins from Edwin Maughan, who operated a coin and

jewelry business in Pittsburgh, Pennsylvania. Over time,

Maughan convinced Nardei that he could increase the return

on Nardei’s investment by trading the coins according to the

fluctuations in the price of gold. Based on this advice, Nardei

gave his existing investment of gold coins and additional

payments for the purchase of more coins to Maughan; in

return, Maughan gave Nardei receipts detailing the number of

gold coins purchased in each transaction. Maughan asked

Nardei to get more individuals involved in the investment

plan, which Nardei did. Eventually, Maughan began issuing

promissory notes to Nardei and the other investors covering

the total amount invested over the years.

After Maughan issued several more notes, it became clear

to Nardei that his investment was not being used to purchase

gold coins, but was being used to purchase jewelry to be

resold in Maughan’s retail location. Nardei sued Maughan in

the Common Pleas Court of Allegheny County and obtained

a judgment on the notes in the amount of $1,051,503.72, plus

interest and costs. The parties then entered into a settlement

whereby Maughan agreed to pay Nardei $1,200,000.00,

without interest, over a specified number of years. Maughan

failed to comply with the terms of the agreement and

eventually filed a voluntary petition for bankruptcy under

Chapter 7.

In the proceedings that followed, the bankruptcy court set

October 19, 1998, as the deadline to file a Complaint

Objecting to the Discharge of the Debtor or to Determine

Dischargeability of Certain Debts, pursuant to Bankruptcy

4 In re Maughan No. 01-4151

1

Rule 4004(a) provides:

In a chapter 7 liquidation case a complaint objecting to the

debtor's discharge under § 727(a) of the Code shall be filed no

later than 60 days after the first date set for the meeting of

creditors under § 341(a). In a chapter 11 reorganization case, the

complaint shall be filed no later than the first date set for the

hearing on confirmation. At least 25 days' notice of the time so

fixed shall be given to the United States trustee and all creditors

as provided in Rule 2002(f) and (k), and to the trustee and the

trustee's attorney.

2

Rule 4007(c) provides:

A complaint to determine the dischargeability of a debt under

§ 523(c) shall be filed no later than 60 days after the first date set

for the meeting of creditors under § 341(a). The court shall give

all creditors no less than 30 days' notice of the time so fixed in

the manner provided in Rule 2002. On motion of a party in

interest, after hearing on notice, the court may for cause extend

the time fixed under this subdivision. The motion shall be filed

before the time has expired.

3

Rule 2004 provides, in relevant part:

(a) Examination on motion

On motion of any party in interest, the court may order the

examination of any entity.

(b) Scope of examination

The examination of an entity under this rule or of the debtor

under §§ 343 of the Code may relate only to the acts, conduct,

or property or to the liabilities and financial condition of the

debtor, or to any matter which may affect the administration of

the debtor's estate, or to the debtor's right to a discharge. In a

family farmer's debt adjustment case under chapter 12, an

individual's debt adjustment case under chapter 13, or a

reorganization case under chapter 11 of the Code, other than for

the reorganization of a railroad, the examination may also relate

Rules 4004(a)1 and 4007(c).2 In August of 1998, Nardei filed

a motion under Bankruptcy Rule 20043 to examine Maughan
No. 01-4151 In re Maughan 5

to the operation of any business and the desirability of its

continuance, the source of any money or property acquired or to

be acquired by the debtor for purposes of consummating a plan

and the consideration given or offered therefor, and any other

matter relevant to the case or to the formulation of a plan.

(c) Compelling attendance and production of documents

The attendance of an entity for examination and for the

production of documents, whether the examination is to be

conducted within or without the district in which the case is

pending, may be compelled as provided in Rule 9016 for the

attendance of a witness at a hearing or trial. As an officer of the

court, an attorney may issue and sign a subpoena on behalf of

the court for the district in which the examination is to be held

if the attorney is admitted to practice in that court or in the court

in which the case is pending.

under oath and determine the appropriateness of filing

objections to the discharge of the settlement debt. The

bankruptcy court granted the motion and ordered Maughan to

appear for an examination on August 21, 1998, and to provide

specific documents sought by Nardei. Although Maughan

appeared for the Rule 2004 examination, he failed to comply

fully with the order to produce the documents. He did,

however, promise to provide the missing documents

promptly.

When the October 19, 1998, deadline for filing a complaint

arrived, Maughan had still not produced all the documents

requested for the Rule 2004 examination. Three days later,

on October 22, 1998, citing Maughan’s failure to produce the

documents and, in the alternative, excusable neglect, Nardei

filed a Motion for Extension of Time to Object to Discharge.

After initially granting Nardei’s motion, the bankruptcy court

allowed Maughan to file a Motion in Opposition to Nardei’s

extension request. The bankruptcy court considered the

parties’ motions and ordered that the time to file a complaint

be extended to a date twenty days following the actual day

Maughan complied with the court’s prior order directing him

6 In re Maughan No. 01-4151

4

The only bankruptcy rule properly before the bankruptcy court and

before the BAP and this court on appeal is Rule 4007(c), because, as

Nardei’s brief says, “[a]t trial, for strategic reasons, counsel for Nardei

choose [sic] to pursue only Nardei’s claim that Debtor’s debt to him is

excepted from discharge [Rule 4007(c)] because it was obtained by fraud

and false pretenses pursuant to 11 U.S.C. § 523(a)(2)(A).” Although each

party briefed and argued the impact of both rules in this case, the

bankruptcy court discussed only Rule 4007(c), and our holding is

therefore limited to Rule 4007(c). However, because the reasoning and

rationale of both rules are consistent, we look to cases applying both rules

for guidance on the question before us.

to produce specified documents for the Rule 2004

examination. Within the time allowed by the extension,

Nardei filed complaint under 11 U.S.C. § 523(c), alleging that

Maughan had obtained the money from Nardei by false

pretenses or false representations. The bankruptcy court held

a hearing in this adversary proceeding on August 22, 2000,

and issued an opinion on January 9, 2001, finding that

Maughan’s debt to Nardei was obtained through false

pretenses, a false representation or actual fraud, and was

therefore excepted from discharge under 11 U.S.C.

§ 523(a)(2)(A).

Maughan appealed the bankruptcy court’s decision to the

Bankruptcy Appellate Panel of the Sixth Circuit, arguing that

the bankruptcy court erred by granting Nardei’s request for an

extension to file his complaint. The BAP agreed, and,

holding that the time limits set forth in Bankruptcy Rule

4007(c)4 are jurisdictional in nature and not akin to statutes of

limitation, reversed the bankruptcy court’s decision. Nardei’s

timely appeal to this court followed.

II. DISCUSSION

We independently review the decision of the bankruptcy

court that comes to us by way of appeal from a Bankruptcy

Appellate Panel. See In re Isaacman, 26 F.3d 629, 631 (6th

Cir. 1994); In re Cassell, No. 00-4523, 2001 U.S. LEXIS

13969, **3-**4 (6th Cir. June 15, 2001) (unpublished). The
No. 01-4151 In re Maughan 7

first question for this court to decide is whether the deadline

provided in Bankruptcy Rule 4007(c) is jurisdictional, such

that the bankruptcy court has no authority to alter it, or is

more comparable to statutes of limitation and subject to the

court’s equitable authority. We review de novo this question

of law. In re Downs, 103 F.3d 472, 476-77 (6th Cir. 1996).

The Federal Rules of Bankruptcy Procedure state that “a

complaint to determine the dischargeability of a debt pursuant

to § 523(c) of the Code shall be filed not later than 60 days

following the first date set for the meeting of creditors held

pursuant to § 341(a).” FED. R. BANK. P. 4007(c).

Additionally, any motion to extend the time for filing such a

complaint “shall be made before the time [to file the

complaint] has expired.” Id. Under Bankruptcy Rule 9006,

courts may enlarge the time for taking action under Rule 4007

“only to the extent and under the conditions stated” in Rule

4007. FED. R. BANK. P. 9006(b)(3). These rules, however,

must be read together with the general powers given to the

courts in bankruptcy under 11 U.S.C. § 105, which provides:

The court may issue any order, process, or judgment that

is necessary or appropriate to carry out the provisions of

this title. No provision of this title providing for the

raising of an issue by a party in interest shall be

construed to preclude the court from, sua sponte, taking

any action or making any determination necessary or

appropriate to enforce or implement court orders or rules,

or to prevent an abuse of process.

11 U.S.C. § 105(a).

There is no question that Nardei failed to file his motion for

an extension prior to the expiration of Rule 4007(c)’s sixtyday deadline. Nardei, however, arguesthat Maughan’s failure

to comply with a prior order from the court led to the late

filing, and Section 105(a) authorizes the court to use its

equitable power to toll the filing deadline and prevent an

abuse of process.

8 In re Maughan No. 01-4151

5

Rule 4003(b) is included in the series of rules along with Rule

4007(c) whose extension is limited by Rule 9006(b)(3).

The Supreme Court had an opportunity to address a similar

rule in Taylor v. Freeland & Kronz, 503 U.S. 638 (1992)

(examining Bankruptcy Rule 4003, which governs the

debtor’s list of property claimed as exempt under 11 U.S.C.

§ 522 on the schedule of assets required to be filed by Rule

1007). Under the rule at issue in Taylor, a trustee or creditor

“may file objections to the list of property claimed as exempt

within 30 days after the conclusion of the meeting of creditors

held pursuant to Rule 2003(a) . . . unless, within such period,

further time is granted by the court.” FED. R. BANKR. P.

4003(b).5 The trustee in Taylor neither timely moved for an

extension of time to object nor timely objected to the debtor’s

including on the list of exemptions proceeds from a pending

lawsuit, believing that the lawsuit had no value. Taylor, 503

U.S. at 641. After the debtor received a significant payment

in settlement of the lawsuit, the trustee attempted to object to

the inclusion of the proceeds on the list of exemptions. Id.

The Supreme Court affirmed the appellate court’s holding

that the trustee had failed to raise a timely objection to the

exemption, and that the debtor therefore could not be required

to turn over the proceeds. Id. at 642.

Looking at the specific allowance under Rule 4003(b) for

trustees and creditors to file objections within thirty days of

the initial creditors’ meeting, the Court found by “negative

implication” that the rule “indicates that creditors may not

object after 30 days ‘unless, within such period, further time

is granted by the court.’” Id. at 643. The Court held that even

if the trustee was correct, and the debtor improperly included

the lawsuit proceeds on the exemption list, the trustee could

not contest the exemption. “Deadlines may lead to

unwelcome results, but they prompt parties to act and they

produce finality.” Id. at 644. The Court explicitly declined

to address the question of whether the bankruptcy court could

have extended the time for filing the objection by invoking its
No. 01-4151 In re Maughan 9

6We did, however, specifically distinguish Taylor in deciding

whether the bankruptcy court had erred in refusing to use its equitable

power to accept the late filing, noting that there the Supreme Court had

not addressed the issue of the bankruptcy court’s equitable powers.

Isaacman, 26 F.3d at 635.

equitable power under Section 105(a), noting that the trustee

had raised this issue for the first time in his opening brief on

the merits in the Supreme Court.

Several lower courts applying Taylor have determined that

the deadlines within the Bankruptcy Rules create

jurisdictional bars and not statutes of limitation. See, e.g.,

First Deposit Nat'l Bank v. Glover (In re Glover), 212 B.R.

860, 862 (Bankr. S.D. Ohio 1997); Goodwin v. United States

Fid. & Guar. Ins. Co. (In re Goodwin), 215 B.R. 710, 714

(Bankr. W.D. Tenn. 1997). This circuit, however, has issued

only one opinion addressing the apparent conflict between the

filing deadlines of the Bankruptcy Rules and the bankruptcy

court’s extensive equitable power. In In re Isaacman, 26 F.3d

629 (6th Cir. 1994), we held—without mentioning Taylor in

our discussion of this issue6—that Rule 9006(b)(3) prohibits

a court from sua sponte extending the time in which to file a

dischargeability complaint, but the rule “does not prevent a

bankruptcy court from exercising its equitable powers under

11 U.S.C. § 105(a) in accepting an untimely filed complaint.”

Id. at 632. At issue in Isaacman was an error created by the

bankruptcy court itself establishing two separate deadlines for

filing complaints; the creditor relied upon the second date and

filed an untimely complaint after the first deadline expired.

We limited our holding to a situation in which a bankruptcy

court erroneously set a second bar date and a creditor

reasonably relied upon that second date when filing an

untimely complaint. Id. (joining the Ninth Circuit, In re

Anwiler, 958 F.2d 925 (9th Cir. 1992), and the Tenth Circuit,

In re Themy, 6 F.3d 688 (10th Cir. 1993), in this specific

holding); see also In re Moss, 289 F.3d 540, 541-42 (8th Cir.

2002) (adopting the reasoning of Isaacman in a factually

10 In re Maughan No. 01-4151

7

Specifically, the court said, “The rules we have just described do

not, as a matter of textual interpretation, address the issue. Although Rule

9006(b)(3) restricts the grounds upon which the bankruptcy court may

enlarge the time for actions required by Rules 4004(a) and 4007(c), these

restrictions still vest a great deal of discretion in the bankruptcy court.”

Kontrick, at 730. We find that statement somewhat puzzling, inasmuch

as Rule 9006(c)(3) provides that the court may enlarge the time for taking

action under these rules “only to the extent and under the conditions stated

in those rules.” (italics added.) Rules 4004 and 4007 both permit the

court to extend the time on motion of a party in interest, but such motion

“shall be made before such time has expired.” That language in the text

of those rules sounds like a condition to us, and rather than vesting

discretion in the court, it appears to us to limit that discretion.

similar case). But the Isaacman decision cracked open the

door of equity through which the bankruptcy court might

accept an untimely complaint.

Other circuits have gone beyond the limited facts of

Isaacman and have found that, in general, the deadlines are

not jurisdictional in nature. For example, the Fourth Circuit,

in Farouki v. Emirates Bank Int’l, Ltd., 14 F.3d 244, 248 (4th

Cir. 1994), held that the Rule 4004(a) deadline is not

jurisdictional and that the rules “do not preclude the

bankruptcy court from exercising its equitable powers in

extraordinary cases.” The Seventh Circuit compared the

filing deadlines to statutes of limitations, first finding that the

text of the rules and statutes failed to resolved the issue7 and

then examining the structure, legislative history and

underlying policy of the rules and the related statutory

scheme. In re Kontrick, 295 F.3d 724, 730-33 (7th Cir.

2002). The Seventh Circuit concluded that the Supreme

Court’s decision in Taylor was not dispositive and held that

the timeliness provisions are not jurisdictional. Id. at 733.

The Second Circuit has also concluded that the deadlines

imposed by these Bankruptcy Rules are not jurisdictional.

European Am. Bank v. Benedict (In re Benedict), 90 F.3d 50,

54 (2d Cir. 1996). The court divided the cases on this issue

into three groups: (1) cases finding that the time periods

imposed by the rules are jurisdictional (citing several district
No. 01-4151 In re Maughan 11

and bankruptcy courts); (2) cases that fail to reach the

jurisdictional question, but permit late filings when the

bankruptcy court has erred (essentially the

Isaacman situation); and (3) cases explicitly rejecting the

view that the time limits are jurisdictional and allowing the

exercise of the court’s equitable power to extend the time for

filing complaints. Id. After specifically adopting the

reasoning from the third group of cases, the court provided an

additional reason for rejecting the characterization of these

time requirements as jurisdictional:

Our conclusion is also consistent with the line of cases

that has allowed an extension of the time period when the

creditor was affirmatively misled by the bankruptcy court

as to the filing deadline. See e.g., In re Themy, 6 F.3d at

688. Since equitable considerations cannot excuse a

jurisdictional defect, there is implicit in those cases the

concept that [Rule 4004(a) and] 4007(c) merely

establish[es] a filing deadline.

Id.

The merits or faults of the reasoning in Isaacman and of

other courts on this issue is of little moment here, since we

are bound by our decision in Isaacman unless it is inapposite

to this case. The first question before us, then, boils down to

whetherIsaacman’s narrow holding that the bankruptcy court

could use its equitable power to circumvent the time limits

required by Rule 4007(c) where an error of the court itself had

caused the untimely filing, requires the legal conclusion that

Rule 4007(c)’s time limits are not jurisdictional. We

conclude that it does. By permitting equity to trump the filing

deadline set by Rule 4007(c) in one particular circumstance,

Isaacman, despite its explicitly narrow holding, compels the

conclusion that the deadline is not jurisdictional, for to hold

to the contrary would be to hold that equitable considerations

can excuse jurisdictional defects. Since “a litigant’s failure to

clear a jurisdictional hurdle can never be “harmless” or

waived by a court,” Torres v. Oakland Scavenger Company,

12 In re Maughan No. 01-4151

487 U.S. 312, 317, n. 3 (1988), the filing deadline cannot be

jurisdictional. Rather, the rule is a statute of limitation—or

simply a deadline—that is generally subject to the defenses of

waiver, estoppel, and equitable tolling. See United States v.

Locke, 471 U.S. 84, 94 n. 10 (1985).

Having determined the BAP erred in its legal conclusion,

and that the bankruptcy court correctly concluded that the

time limits in Rule 4007(c) are not jurisdictional, we must

next determine whether the bankruptcy court properly used its

equitable power by allowing Nardei to file his untimely

objection. We review the bankruptcy court’s use of its

equitable power for an abuse of discretion. See Isaacman, 26

F.3d at 633. “We will find an abuse of discretion only upon

a definite and firm conviction that the district court

committed a clear error of judgment.” In re Kissebirth, 273

F.3d 714, 721 (6th Cir. 2001).

There are five factors that should be considered when

deciding to apply the doctrine of equitable tolling: “The

factors are: (1) lack of actual notice of filing requirement;

(2) lack of constructive knowledge of filing requirement;

(3) diligence in pursuing one's rights; (4) absence of prejudice

to the defendant; and (5) a plaintiff's reasonableness in

remaining ignorant of the notice requirement.” Andrews v.

Orr, 851 F.2d 146, 151 (6th Cir. 1988). Since Nardei did not

claim lack of notice or knowledge of the filing deadline, “our

inquiry must focus on the diligence used by the plaintiff in

pursuing its rights and the resulting prejudice, if any, to the

defendant.” First Bank System v. Begue (In re Begue), 176

B.R. 801, 804 (Bankr. N.D. Ohio 1995).

In its opinion granting the extension, the bankruptcy court

found that Maughan’s failure to comply with the court’s order

to turn over documentation justified the extension.

Specifically, the court recognized the “dilemma” faced by

Nardei and his counsel; since Bankruptcy Rule 9011 creates

an affirmative obligation on the creditor to investigate fully

before initiating an adversary complaint, it would have been
No. 01-4151 In re Maughan 13

improper for Nardei to file his complaint before Maughan

turned over all the relevant documentation. The record

indicates that Nardei continually tried to get the

documentation from Maughan, only to be misled by

Maughan’s promise that the information was forthcoming.

We find no error in the district court’s conclusion that Nardei

was diligent in seeking to enforce his rights and that

Maughan’s delay in producing the documents contributed to

Nardei’s failure to timely file his complaint. And although

Nardei could have filed his motion for an extension within the

time decreed by the rule, he filed that motion only three days

out of rule, and we find no error in the bankruptcy court’s

implicit conclusion that this delay, too, was partly attributable

to Maughan’s conduct or in the court’s express conclusion

that Maughan suffered no prejudice from the extension. The

bankruptcy court did not abuse its discretion by using its

equitable power to ensure that the debtor was not permitted

“to frustrate the ability of a litigant to comply with applicable

law by failing or neglecting to adhere to lawful orders of the

Court.”

III. CONCLUSION

For the foregoing reasons, we REVERSE the order of the

Bankruptcy Appeal Panel and AFFIRM the decision of the

Bankruptcy Court. We REMAND the case for proceedings

consistent with this opinion.